Every financial planning book would tell you that one of the first things that you should do to rake in wealth is to free yourself from debt. Many would also say that you should do it in the quickest time possible. That often means that you place a premium on debt servicing in your monthly budget. While this is an ideal plan, there can be some exceptions:
When you don’t have an emergency fund. Emergency funds are crucial as proven by today’s economy. So be sure that you allocate some funds (while continuing to service your debt) to build up your emergency fund at least until you can put up a month’s worth of living expenses. Then you can channel your efforts in debt servicing especially if you’re paying off debt that kills you with interest monthly.
When dealing with fixed rates. Some loans have fixed interest rates for fixed terms. Loans like car loans might give you a fixed rate for a fixed term. Check if you can make early payments that would chip away at the interest. If your loan papers with your bank or lender doesn’t allow such arrangements, then simply maximize your loan terms and have the flexibility to juggle your funds to other efforts.
